The UAE has offered a deal to buy minority shares in publicly traded government-owned enterprises at a negotiated price, as well as a seat on each of the firms’ boards, in response to Pakistan’s request for new loans in the billions of dollars.
In case of acceptance, the offer could provide a significant boost to the cash-strapped government and will represent a break from Islamabad and Abu Dhabi’s customary lender-borrower relationship.
The news follows China’s decision to roll over another $2 billion in Pakistani debt maturing from June 27 to July 23, delivering a sense of relief after transferring $2.3 billion the previous week.
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According to well-placed sources, the UAE government has offered to acquire 10-12 percent shares in public enterprises listed on the stock exchange through its sovereign wealth funds.
Finance Minister, Miftah Ismail said, “There is a proposal from a friendly country to purchase Pakistani companies’ stocks on buy-back basis, which means buying secured-loan based securities.”
According to the sources, the UAE was hesitant to send over another $2 billion cheque to Islamabad after Pakistan failed to repay the $2 billion loan obtained in February 2019. The UAE rolled over $2 billion in debt for another year in March of this year.
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Their interest in Pakistan could significantly enhance the share prices of approximately 20 publicly traded state-owned companies, including those controlled by the military’s commercial arms. As per the sources, Fauji Foundation enterprises were also on the agenda, and the foundation’s managing director recently attended the meetings.
According to the sources, Pakistan can immediately receive an investment of $1 billion to $1.3 billion by selling 10% ownership in blue chip companies.
However, the bureaucracy was hesitant to proceed with the deal, which delayed the entire process and irritated the UAE government.
According to the Privatization Commission documents, “the Privatization Commission Ordinance of 2000 does not have a provision for a negotiated and non-competitive sale.”
The commission had proposed a competitive transaction for the Block Trade of Shares of the Listed SOES to institutional investors, including government and government entities, in accordance with current law, rules, and regulations, with no additional legislation.
However, the sources, the UAE is not interested in the bidding process. It has proposed to Pakistan that both parties choose independent financial consultants to work out their prices, and that a final price be determined based on their inputs.